Tide turning for motor industry - TransUnion
It’s been a tale of two markets in the past year with the new vehicle market likely to close out 2009 some 26 percent down while the used car market is heading for 10 - 15 percent growth over the 12 month period.
For the industry as a whole, the tide appears to be turning, albeit slowly, according to Mike von Höne, CEO of vehicle risk intelligence company TransUnion Auto Information Solutions. He was addressing representatives of the motor and associated industries at the TransUnion Auto Trends Forum in Sandton today (18 September).
Data analysed by TransUnion for presentation at the Forum was drawn from the company’s database of information on almost 12-million vehicles obtained from manufacturers, importers and distributors of over 100 vehicle marques, 53 financial providers, as well from the 35 000 dealer submissions received by the company every month.
Von Höne said TransUnion’s relatively positive outlook for the motor industry was based to a large extent on the fact that the worst of the international and local financial and liquidity crises appeared to be over, although an increasingly conservative regulatory environment and approach to risk remained.
“The world economies appear to be on the mend and there are already positive signs from China, France and Germany, but recovery in the UK and US is likely to be slower. Despite these initial indications of recovery, South Africa’s vehicle export market is likely to remain weak through 2010 on the back of limited international demand and a strong rand,” he added.
At home, although gross domestic product (GDP) growth was expected to turn positive next year, consumers were likely to remain conservative through 2010 due to the continued weak borrowing capacity, uncertain economic outlook especially in relation to unemployment and the need to reduce personal debt levels.
TransUnion predicts that based on current trends in NAAMSA released sales figures, the overall rate of decline of the new car market would continue to slow through the remainder of 2009 and would end the year with sales of around 390 000 units, some 26 percent down on last year. Some good news, however, was that the dealer consolidation process was largely complete, with dealers having rationalised costs by cutting staff and closing dealerships over the past 18 months.
In contrast, based on TransUnion’s “computed used market” calculations, the overall used market was expected to reach around 600 000 units by the end of 2009, up almost 15 percent on last year, reflecting the strong relative shift in favour of used vehicles. Over the past 18 months TransUnion has seen the ratio of used vehicles financed to new vehicles financed move from 1.2 to one to 2.5 to one.
“Despite this ratio having moderated slightly in the past three months, TransUnion expects the relative shift in demand from new to used cars to continue through the rest of this year and well into the second half of 2010. In addition, TransUnion has noticed that prices of used cars have started to firm over the past two to three months as the oversupply position has begun to unwind and demand has increased,” Von Höne continued.
“This trend is likely to continue through at least the first half of 2010 with further margin improvement for dealers. Indeed, used cars will remain a significant profit opportunity for dealers through the rest of 2009 and into 2010.”
TransUnion believes change in the overall car market will likely be felt towards the middle of 2010 at which time the decline in new passenger vehicles sales would turn positive and start to gain momentum.
In fact, TransUnion Auto is forecasting that the overall new car market would grow by some 10 percent in 2010, with gains in fleet and rental business reflecting in the first quarter. This will be followed by higher private demand in the second half of the year as consumer financial positions improve and banks begin to ease lending criteria to good, quality customers.
Turning to the makeup of the market itself, TransUnion does not anticipate large increases in the number of new model derivates in 2010, nor does it anticipate that there would be further significant price increases, given the ongoing strength of the rand. However it is expected that the entry- and mid-level segments would likely remain hotly contested as consumers will continue to be price-and value-conscious, Von Höne concluded.
